Economy Check: Inventories And Retail Sales Rise

Could Bode Well For Holiday Season

U.S. businesses increased their stockpiles in September by 0.6%, the largest amount in eight months, the Commerce Department announced this week. The rise pushed total inventories to $1.68 trillion, up 3.1% from a year ago. Analysts say the better-than-projected economic growth in the U.S. during Q3 can be attributed to an increase in restocking from July through September.

The rise in September inventories was led by a 0.9% increase in stockpiles held by retailers. Inventories held by manufacturers and wholesalers both increased 0.4%. The overall economy grew at a 2.8% annual rate in the July-September quarter, an improvement over the 2.5% GDP expansion in Q2.

Separately, the government reported that retail sales rose 0.4% in October after a flat September, also exceeding economists’ expectations. The growth suggests that consumers weren’t held back by the partial government shutdown. October’s retail sales were driven by furniture and electronic stores, clothing retailers and sporting good shops.

The better-than-expected reports could bode well for holiday sales. According to a survey by the National Retail Federation, up to 140 million people plan to or will shop over the Thanksgiving weekend. Of those who expect to shop that weekend, 33 million (23.5%) plan to shop on Thanksgiving Day. According to the survey, 69.1% plan to shop on Black Friday.

Finally, the Commerce Department also said Wednesday that consumer prices dipped 0.1% in October, driven down by lower gasoline costs. This was the first decline since the spring. The Consumer Price Index had risen 0.2% in September. Economists projected it would be unchanged in October. The lack of inflation is one factor being considered by the Federal Reserve as it decides when it will reduce its much-discussed monthly asset purchases. While the Fed could taper in December, the FOMC is equally likely to maintain its current level of purchases well into 2014, analysts say. Any decision to taper will drive interest rates higher.